You can only deduct 2% of you AGI, or ( adjusted gross income). This simply means if you earned 50,000. 2% would be 1000.00. So everything over the 1000 you can deduct. Straight from the accountant, which happens to be my wife.

The $2K is not affected, but you'll owe taxes on the $12K withdrawal, as well as a 10% early withdrawal penalty (before age 59 1/2) unless certain exemptions apply, one of which is for a "first time" buyer of a home. if you haven't owned a home in the last two years, i believe it is, and you're going to build your residence on that land this year, you may qualify to avoid the penalty. But, in any event, you would owe tax on the withdrawal IF the IRA is a tradional IRA, and not a Roth IRA. Very simple, eh?

Educational expenses (tuition, books, transportation, among others) are ONLY deductible if the education is is for the specific purpose of allowing you to keep your job or to advance in your career field. Any educational expenses which are necessary for you to meet the "minimum requirements" for any particular job are NOT deductible.

There is a huge difference between tax evasion (a felony) and deducting an item which is not allowed (an error or a difference of opinion). Tax evasion requires (among other things) an INTENT to avoid taxes and usually results either from failing to file a return at all or from INTENTIONALLY failing to report income that you KNOW (or should know) and BELIEVE should be reported. An incorrect deduction (that can be expensive in terms of penalties and interest) can result from poor accounting or arithmetic, misunderstanding of the rules and regulations, poor accounting advice, or from an honest difference of opinion. There is no INTENTION to fail to pay a tax in the case of the disallowed deduction; it is no way nearly as serious as failing to report income.

But no, you most likely can't deduct your books and tuition.

Harry's response is incorrect. He is confusing educational expenses claimable as miscellaneous deductions on the Schedule A with expenses and deductions that can calculated using Form 8863 or Form 8917. To claim the deduction calculated on the 8863 / 8917, the taxpayer must file Form 1040 or Form 1040A.

Can someone with more knowledge on this then I can seem to find locally advise on the following...

I was late on filing my taxes from 2006 and 2007. 2006 I would have got nothing back so I wasn't in any hurry to file. In 2007 I filed for both years. I got a little bit back.

In 2008 the beginning of I filed for Chapter 7 Bankruptcy due to a ton of medical bills from a catastrophic accident that required surgery. I couldn't cover such on my $8-$10 an hour job that didn't have health insurance available.

I was told that all of the money that you get back after a bankruptcy goes to the attorney or the IRS. I asked the attorney and he just had me sign my 2007 tax refunds over to him.

In 2008 I didn't file my taxes after the bankruptcy. So that years refund apparently all will go to the IRS is this correct? So if I filed this year for 2008 and 2009.. What will happen?

Add to the mix that I got married this year. I have a family of 5 including myself. My wife has two kids from her previous marriage. According to the divorce terms, her ex husband claims one of the kids each year on the tax filings and she can claim the other. Typically she doesn't really work outside of babysitting for a family member that pays her every couple of weeks. She stays home takes care of our kids and babysits and earns a little each week for that, though not much. Previously she claimed single as we weren't married according to the state and filed head of household, with her and her two kids as dependents and got some sort of credit for "un-earned income' whatever that means.

This year I figured things would be different with the marriage license and filing taxes with all four out of five of us. On my taxes for part of the year since our marriage I have had 5 dependents being claimed on my taxes that work takes out each week from our paycheck. Being that part of my wage is Commission, they tax us at 60% on those and they also do extra earnings that they place on a prepaid debit card. These too are now taxed prior to receiving anything, so you earn theoretically a $5.00 commission on something then you actually receive like $2-$3 on your debit card load.

Now some local know-it-all's are telling me that being that I didn't get 2008's filings done, when i file for 2008 and 2009 being married and being able to claim a couple of us at least that all the taxes from BOTH years will go to either the attorney or the IRS and that we are better off just having me file for myself and have her file separately and claim the kids and the babysitting income and the un earned income credit? Is this accurate? I will get no refund on either year and it is better to have her attempt to claim as stated?

We rent our place of residence and really have nothing to claim outside of the kids and her babysitting income if applicable btw. We own no property or stocks or anything really of value, couldn't afford the stuff if they were giving it all away free

Can someone with more knowledge on this then I can seem to find locally advise on the following....

You should immediately file any years you haven't filed, and be sure to file on time any future years. Nothing good comes from not filing on time, unless you are unable to collect all your tax data by filing time, and, in that case, you should request an extension of time.

As for the IRS and your attorney getting any refunds you have due, your attorney gets whatever you have agreed to pay him. He has no automatic claim, unless you agreed to this, to any tax refund by virtue of any law. As for IRS, if you deficient in paying the IRS taxes that have been assessed for past years, and it appears from what you stated that you do have an existing tax assessment, yes, they would likely apply any refund due you to that past tax liability. It should be said that EVERY person that has taxable income eventually gets an administrative tax return prepared for them, by IRS. The advantage of filing the return yourself rather than waiting for the IRS to file it is that you can prepare your return with any credits, exemptions, or deductions that you may be entitled to, benefits that the IRS probably will not apply to their return filed on your behalf. The effect of filing yourself is that you are very likely to end up with a lower tax liability, and if you are entitled to a refund or at least credited for that refund, in your case, you would then receive it IF you had filed your return. You will NOT get either a refund OR a credit for any refund if IRS has prepared their administrative copy of your return, and you have not filed your return. Also, their administrative preparation of your return doesn't relieve you of the legal requirement to file.

As for you and your wife's filing status, you have two choices, provided you were in fact legally married on 12/31 of each filing year, either to file "married filing separate" or "married filing joint." You could have your return prepared both ways and see how, overall, you benefit. It is very likely, however, that you will do best by filing joint, given the circumstances you describe, because, in part, if you and your wife file separate, she cannot claim the earned income credit and other things that you could potentially take advantage of when you file joint, but lose, when you file separate. Filing jointly may allow you to take advantage of certain favorable tax provisions that only accrue to your benefit when you file jointly.

BTW, in the event you were not legally married on 12/31 in any of the unfiled tax years, by all means, she should file single as head of household, and you as single on your own tax returns.

Here is an article which lightly discusses this married filing separate issue: